Increase in VAT rates as of January 1, 2024

The referendum in September 2022 approved the amendment to the AHV Act and the federal decree on the additional financing of the AHV. As a result, the VAT rates of the effective accounting method will be increased as follows on January 1, 2024:

The majority of balance and flat-rate tax rates will also be adjusted. Now is the time to address the issue of rate increases.

Cross-period benefits: How do I set the correct tax rate?

In order to determine the correct tax rate, the time at which the service is provided is always decisive. In the case of cross-period services (i.e. services that continue beyond the end of the year), they must always be divided into a service period before and after 01.01.2024 and settled pro rata temporis at the previous or new tax rate; specifically:

- If the benefit is provided by 31.12.2023, it is subject to the previous rate (7.7 %, 2.5 % or 3.7 %);

- If the service is provided or due from 01.01.2024 (e.g. in the case of advance payments), the new tax rates (8.1%, 2.6% or 3.8%) must be applied.

Neither the date of the invoice nor the date of payment are therefore decisive for determining the tax rate, but only the date or period in which the service is provided. Services must therefore be broken down on the invoice according to the relevant period and charged at the correct tax rate for the period in question. This applies, for example, to periodic services such as subscriptions.

What to consider during the changeover - our recommendation

The earlier you deal with the issue of "changes to VAT rates", the easier it will be to implement them. In order to maintain an overview of previous and new VAT rates and to simplify invoicing, we recommend concluding orders at the end of 2023 via partial invoices to the service recipient. This measure will make it easier to issue invoices in 2024 and to identify the service period and thus split the invoice. At the same time, invoicing will result in lower work in progress as at 31.12.2023, which will simplify the annual financial statements and please the CFO.

You should also be able to answer the following questions positively at the turn of the year:

1. have all official price lists been changed to the new VAT rates from 01.01.2024?

2. is the accounting program set up in such a way that the previous and new tax rates can be recorded?

3. has the format of the VAT quarterly statements in the accounting program been adapted?
--> The VAT settlement forms have been revised as of 01.07.2023 so that the previous and new VAT rates can be settled with the Federal Tax Administration, VAT Department.

4. have all employees been trained in the effects of the VAT rate increase?

a. Are they sensitized to the fact that they look at invoices more critically than usual before entering them in the accounting department at the turn of the year in order to book them correctly?

b. Will you check and list the correct VAT rates on the invoices received and issued? It should be noted that an invoice may contain services with the previous and the new VAT rate.

Detailed information can be found in the "VAT Info 19" Tax rate increase as of January 1, 2024. We will be happy to assist you with further questions and solutions.